ECC to reconsider Engro terminal lease extension

ISLAMABAD: The Economic Coordination Committee (ECC) is set to take up again the issue of a 30-year lease extension granted to Engro Vopak Terminal Limited after Investment Minister Qaiser Sheikh objected to the decision, saying it breached public procurement rules and could hurt the development of petrochemical industries.

Sheikh told The Express Tribune that he had written to ECC chairman and Finance Minister Muhammad Aurangzeb and that the matter would be placed before the committee on Tuesday. He also said the federal cabinet had sent the case back to the ECC after he raised objections. The current 30-year term is due to expire on Thursday.

The Port Qasim Authority signed a build-operate-transfer agreement with EVTL in 1996. Earlier this month, on June 5, the ECC approved a further 30-year extension through an additional agenda item. A finance ministry statement issued after that meeting said: "The ECC further considered a summary submitted by the Ministry of Maritime Affairs regarding operational continuity of EVTL and approved it"

In his correspondence, Sheikh protested that his opposition was not reflected in the meeting record. He stated: "My views and comments placed before the ECC meeting held in respect of additional agenda item extension of EVTL Implementation Agreement are not recorded in the subject minutes"

Minister cites procurement rules

Sheikh argued that the company’s unsolicited proposal did not meet the conditions of uniqueness and innovation under Rule 2(1)(ka) and Rule 37-A of the PPRA Rules, 2004. He said the extension was contrary to the rules, would create a monopoly and would damage the promotion of petrochemical industries in the country. He further described a fresh 30-year extension without competitive bidding as opposed and unacceptable.

Sheikh also said PPRA rules and an internal assessment committee had already concluded that EVTL’s proposal did not qualify under the relevant provisions. In his letter, he maintained that reopening negotiations through amendments to the implementation agreement and supplemental implementation agreement amounted to bypassing open competition and gave an unfair advantage to the existing concessionaire through another 30-year term.

The Cabinet Division, which maintains records of cabinet bodies and arranges their meetings, did not respond to requests for comment on why the minister’s objections were not included in the ECC minutes. The secretary of the Cabinet Division also did not respond to a question on whether the matter would be placed before the ECC again after Sheikh’s protest.

Background of the lease process

The ECC had been informed that under the original agreement, talks on any further extension were required to begin 10 years before the expiry of the first 30-year term. It was told that Port Qasim Authority began those negotiations but the two sides did not reach agreement and the discussions remained unresolved.

The PQA Board then decided in 2021 that negotiations had ended and that no extension could be granted. It also directed that a competitive process be started through the hiring of a consultant in line with public procurement rules. The official record, shows that EVTL submitted an unsolicited proposal in 2022, but the PQA in-house committee found that the proposal was not unique and innovative and therefore did not fall within Rule 37(A) of the Public Procurement Rules, 2004.

The government later opted for a second round of talks with the company while allowing the bidding process to continue in parallel. The PQA board then approved amendments to the implementation agreements. Following that, both sides agreed to a proposal for another 30-year extension subject to certain conditions. The extension had already been approved by the PQA board before receiving ECC approval this month.

Terminal’s market role

Government officials told the publication that the ECC approval could be revisited in light of the objections raised by the investment minister. With the cabinet having referred the matter back, reconsideration is now scheduled for Tuesday.

EVTL handles more than 60% of Pakistan’s bulk chemical imports and around 55% of marine liquefied petroleum gas imports. Its operations were also said to save the national exchequer millions of dollars each year by supporting downstream petrochemical investment.